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Rothschild & Co Annual Report 2016/2017

Annual Report 2016/2017

Rothschild & Co | Annual Report | 2016/2017 3

ContentsMessage from the Chairman of the Supervisory Board 6

Message from the Chairman 7

Message from the Management Board 8

1. Overview

Overview of businesses 12

World presence 14

Corporate governance 16

Organisation chart 19

Corporate Social Responsibility 20

Shareholder information 21

2. Business review

Rothschild Global Advisory 26

Rothschild Private Wealth & Asset Management 32

Rothschild Merchant Banking 38

3. Management report

Results for the 2016/2017 financial year 50

Information on the Company and share capital 59

Corporate governance 73

Internal control and risk management procedures 96

Corporate Social Responsibility 104

4. Financial statements

Consolidated financial statements 122

Parent company financial statements 187

The Rothschild & Co offices in Paris

4 Rothschild & Co | Annual Report | 2016/2017

History

Preserving a first-class reputation across generations

Creation of Paris Orlans,

a French railway company.

1838

Paris Orlans discontinues its

railway business.

1937

Relaunch of Rothschilds French financial

activities through Paris Orlans following

the nationalisation of the Rothschild

French bank in 1981.

1982

Paris Orlans streamlines

its organisation,optimises its regulatory capital and preserves

family control, with its conversion into

a partnershiplimited by shares.

2012

Paris Orlans acquires control of the banking activities at a global level and completes

reorganisation of family shareholdings

following the unification of the worldwide Group

structures in 2003.

2008

Paris Orlans changes its name

to Rothschild & Co, a necessary outcome

of the Groups transformation.

2015

Rothschild & Co pursues its simplification with

the removal of banking licences and the sale of non-core business.

2016

Rothschild & Co offers full-scale financial advice and services around the

world.

Today

Rothschild & Co completes the merger

with Compagnie Financire Martin

Maurel.

2017

Rothschild & Co | Annual Report | 2016/2017 5

Highlights

Key figures (as at 31 March 2017)Rothschild & Co provides independent advice on M&A, strategy and financing, as well as investment and private wealth and asset management solutions to large institutions, families, individuals and governments, worldwide.

With approximately 3,400 talented employees on the ground in over 40 countries around the world, we deliver a unique global perspective.

As a family-controlled business that has been at the centre of the worlds financial markets for over 200 years, we can rely on an unrivalled network of experts and are known for our track-record of outstanding execution in financial services.

Our integrated global network of trusted professionals and decision-makers provide in-depth market intelligence, meaning we can be closer to current issues than any other global financial institution in our core markets.

Informed by experience yet not limited by convention, we are able to separate insight from information and access opportunities for our clients from a unique angle.

It is this scale, local knowledge and intellectual capital that allow us to provide a distinct perspective and effective long-term solutions for our partners.

A distinct perspective that makes a meaningful difference

(1) Excluding exceptional items. For more information, please refer to page 50.

Revenues

1,767m +11%

Operating income

429m +34%

Shareholders equity Group share

1,829m +20%

Net profit Group share(1)

193m +43%

EPS(1) (Earnings Per Share)

2.74 +41%

ROTE(1) (Return On Tangible Equity)

14.6% +29%

6 Rothschild & Co | Annual Report | 2016/2017

Dear Shareholders,I would like to take this opportunity to thank the Board, the management team and the employees for all their hard work this last year allowing us to announce excellent full year financial results. The Managing Partner, represented by its Chairman, David de Rothschild, its Executive Deputy Chairman, Alexandre de Rothschild and the four Managing Partners, Nigel Higgins, Marc-Olivier Laurent, Robert Leito and Olivier Pcoux, lead the Group with energy and a clear vision. Together, they successfully ensure that the unique culture found within Rothschild & Co is upheld, thereby guaranteeing the exceptional high standard of work we offer our clients, and producing such good results.

At the Shareholders General Meeting held on 29 September 2016, the merger by absorption of the company Compagnie Financire Martin Maurel was widely approved. This merger, completed on 2 January 2017, will create a leading independent private bank in France, Rothschild Martin Maurel. It builds upon the relationship that has existed between the Rothschild and Maurel families for three generations.

As Chairman of the Supervisory Board, my role is to ensure that the Company maintains a high level of corporate governance. The composition of the Supervisory Board has changed over the past 12 months, two members have left the Board and a new member has been nominated. It was with great sadness that we informed you of the passing away of Lord Leach of Fairford on 12 June 2016. Adam Keswick was appointed his successor at the Shareholders General Meeting held on 29 September 2016. Martin Bouygues, after many years as a Board member, resigned on 27 September 2016 for personal reasons.

Among the 14 members of the Supervisory Board, two-thirds are independent. During the last Shareholders General Meeting, five members terms of office were renewed as follows: Angelika Gifford, Luisa Todini, Carole Piwnica, Arielle Malard de Rothschild and Dr. Daniel Daeniker. Franois Henrot was also appointed as a non-voting member (censeur) of the Supervisory Board at the same General Meeting.

Message from the Chairman of the Supervisory Board

It is also my responsibility to ensure that the Supervisory Board discharges its responsibilities regarding internal control and risk management matters. I would particularly like to thank the chairmen of our Risk and Audit Committees for the time that we regularly spend together, prior to each Board meeting to discuss the different subjects under debate by the respective committees.

At our next Shareholders General Meeting, which will take place on 28 September 2017, Jacques Richier, appointed for the first time to the Board in 2010, will end his term of office. He would like to devote his time to his new mandate within the Group, a Board member of Rothschild Martin Maurel. We are particularly pleased that Jacques Richier wishes to dedicate his time to this new entity for which we thank him profusely.

In our Shareholders General Meeting document to be published soon, you will find more detailed information on the Boards composition and in particular regarding those members whose re-election will be on the agenda of the Shareholders General Meeting this year. Shareholders will also be asked to approve an increase of 8% in the dividend to 0.68 per share at the same meeting.

As always, I would like to thank you for your continued support for Rothschild & Co.

ric de RothschildChairman of the Supervisory Board of Rothschild & Co

Rothschild & Co | Annual Report | 2016/2017 7

Dear Shareholders,This years financial results are extremely encouraging and confirm that the combination of our heritage, independent model and focus on hiring the best talent are key to the Companys success. We are witnessing the true partnership that exists between our three businesses as each goes from strength to strength.

Our Global Advisory business had a record breaking year, with revenues and profits progressing 14% thanks to an increase in our market share of global M&A, and our growing activity in financing advisory. Private Wealth & Asset Management improved revenue by 7% in difficult market conditions and our Merchant Banking business saw revenue jump 32%.

Thanks to these strong results, shareholders will be rewarded with a dividend of 0.68 per share, an increase of 8% in line with our announced progressive dividend policy, subject to approval at the Shareholders General Meeting to be held on 28 September 2017.

The global economy has again continued to grow, and the consensus recently has been less pessimistic than usual: even the International Monetary Fund has reviewed its outlook positively. The new US administration is so far having less of an impact on the global economy than many had suggested, and a much-hyped populist backlash against the EU has faltered in France and also in the Netherlands and Germany. Meanwhile, a year after the vote for Brexit, the full impact of this decision on the relationship between the UK and the EU is far from clear. Nevertheless, we believe that it will not be a significant challenge for our business. Against this backdrop, capital markets have delivered healthy returns recently, with unusually low volatility. It would be foolhardy to expect such benign trends to continue indefinitely, but we think that the business climate can continue to offer opportunities for far-sighted managements and investors.

Message from the Chairman

Following our announcement last June of the merger between the Compagnie F